Temasek’s Azalea ups retail offering in latest CFO

Astrea V is backed by cashflows from a diversified pool of private equity funds managed by firms including KKR, TPG and Warburg Pincus.

Retail investors are being offered a larger chunk of Astrea V, the latest private equity-backed collateralised fund obligation from Temasek subsidiary Azalea Asset Management.

Azalea has made S$180 million ($132 million; €116 million) of Class A-1 bonds – roughly 22 percent of the total $600 million US dollar-valued offering – available to the Singaporean public, according to a statement on Tuesday.

The bonds, which are backed by cashflows from a pool of 38 private equity fund stakes acquired on the secondaries market, will have a S$2,000 minimum subscription and a 3.85 percent fixed interest rate a year.

Astrea V is only the second CFO to include a retail tranche. Last year’s Astrea IV included S$121 million of bonds – around 18 percent of the $501 million total – available to the public and generated nearly S$890 million in valid applications – a 7.4 times oversubscription rate.

Azalea plans to expand its private equity product offerings for a wider investor base, chief executive Margaret Lui said in the statement.

In a collateralised fund obligation, an equity holder sells a portfolio to a new vehicle with a new manager. The original owner can select which kinds of notes it wants to hold and extract liquidity by selling the equity to a new buyer.

The public offer follows the placement of S$135 million of Class A-1 bonds and US dollar offerings of $230 million Class A-2 bonds and $140 million Class B bonds to institutional and accredited investors on 11 June. The $3.4 billion order book was 70 percent institutions, including endowments, foundations and insurers, with accredited investors making up the remainder.

Astrea V comprises $1.3 billion in net asset value of funded commitments and $215 million of unfunded capital commitments across 38 private equity funds, according to its prospectus. Astrea IV had $1.1 billion of NAV and $168 million of uncalled capital across 36 funds.

“This larger portfolio allows us to offer more PE to Singapore retail investors while maintaining a conservative capital structure,” said En Yaw Chue, head of private equity funds at Azalea.

“To help investors understand the Astrea V PE bonds, including the risks associated with them, we will be conducting public presentations during the offer period and encourage interested investors to attend.”

Astrea V is managed by 32 general partners holding 862 underlying portfolio companies, compared with 27 GPs and 596 assets in Astrea IV. KKR is the largest GP at 9 percent of NAV, followed by Warburg Pincus and TPG. Silver Lake Partners IV, a $10.3 billion 2013-vintage, marks the single largest fund position at 5.4 percent of NAV.